administration and effectiveness of the environmental ... · administration and effectiveness of...

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Administration and Effectiveness of the Environmental

Contribution Levy

Tabled 25 June 2014

25 June 2014 ▌Administration and Effectiveness of the Environmental Contribution Levy

Presenter

Presentation Notes

The Auditor-General provides assurance to Parliament on the accountability and performance of the Victorian Public Sector. The Auditor-General conducts financial audits and performance audits, and reports on the results of these audits to Parliament. On 25 June 2014, the Auditor-General tabled his performance audit report, Administration and Effectiveness of the Environmental Contribution Levy.

Background

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• Environmental Contribution Levy (ECL) established in 2004.

• Key initiative of the Our Water Our Future white paper.

• Water Industry Act 1994 objectives of the ECL are to: a) promote the sustainable management of water or b) address adverse water-related environmental impacts.


pages 1–4

Presenter

Presentation Notes

During 2004 the Victorian government amended the Water Industry Act 1994 to require water businesses to pay the Environmental Contribution Levy—the ECL. This was part of a reform agenda that was set out in the Our Water Our Future white paper. The intention of the levy was to source monies for much needed water-management initiatives following years of environmental degradation from prolonged drought, and to provide price signals to Victorians about the impact of water consumption on the environment. The objectives of the levy outlined in the legislation are broad. They are to: - promote the sustainable management of water or - address adverse water-related environmental impacts.

Background – continued 3

• A tranche is a four-year period. • ECL collected from water businesses over three tranches:

• 5 per cent of revenue for urban water businesses. • 2 per cent of revenue for rural water businesses.

• Cost passed on to water users through bills.

• ECL is not a line item on bills. • Estimated average annual

cost: • $22.12 in 2007 • $27.54 in 2012 • $44.25 forecasted in 2014. Flood monitoring with acoustic doppler on the

Goulburn River at Loch Garry. Photo courtesy of DEPI.


pages 1–4

Presenter

Presentation Notes

The levy is collected from water business over a four-year period (known as a tranche) according to a prescribed amount, which is equivalent to: - 5 per cent of revenue for urban water businesses - 2 per cent of revenue for rural water businesses. The cost is able to be passed on to water users through their bills. Although not a line item on water bills the estimated average annual cost for water users across Victoria was just over $22 in 2007, and is forecasted to be $44.25 in 2014.

Funding and ECL projects 4

Tranche 1 2004–05 to 2007–08

Tranche 2 2008–09 to 2011–12

Tranche 3 2012–13 to 2015–16

Revenue collected

$227 million $278 million $407 million (forecast)

Expenditure $217 million 2004–05 to 2008–09

$289 million 2007–08 to 2012–13

$30 million in 2012–13 of the $236.8 million

budgeted (a) Initiatives 45 projects under five

strategic priorities from the Our Water

Our Future white paper.

27 projects under four strategic priorities

including 11 continuing from tranche 1, eight

election commitments and eight new

initiatives.

27 projects, including four continuing from

tranche 2, and a range of new projects

reflecting current government priorities.

(a) The government is expected to commit further levy funds to projects in future years of tranche 3. Note: Some expenditure has occurred outside the four-year timeframe for revenue collection of each tranche.


Presenter

Presentation Notes

This table details the revenue collected, expenditure and initiatives funded by the ECL. The first two tranches of the levy raised over $500 million. By the end of the third tranche, the levy is expected to have raised a further $407 million. To date, projects funded by the levy have covered a range of water-management initiatives including: - water metering - groundwater management and monitoring - river restoration - irrigation modernisation - improvements to water accounting procedures.

Roles and responsibilities 5

ECL funds held in consolidated revenue and are allocated to the Department of Environment and Primary Industries (DEPI) as part of the State Budget and Cabinet approval processes. DEPI’s role: • Advise on the rate of the levy and projects proposed for funding. • Oversee the delivery of levy-funded initiatives. • Annually report details of the levy’s expenditure. • Review the levy at the end of each tranche. Delivery partners • External parties responsible for delivery. • Catchment management authorities, water businesses and commercial

service providers.


page 3

Presenter

Presentation Notes

Funds from the levy are held in consolidated revenue and are allocated to the Department of Environment and Primary Industries (or DEPI) as part of the State Budget and Cabinet approval process. DEPI is responsible for: - providing advice to government on the rate of the levy and projects proposed for funding - overseeing the delivery of levy-funded initiatives - annually reporting details of the levy’s expenditure - undertaking a review of the levy at the end of each tranche. Levy-funded initiatives have been delivered across metropolitan and regional areas, and have been implemented through partnerships with a range of state and local government bodies that include: - catchment management authorities - water businesses - commercial providers.

Audit objective 6

To determine the effectiveness of DEPI's administration of the ECL and its funded initiatives. Focused on: • administration and

governance • whether funded initiatives

achieved their intended outcomes

• transparency and public reporting of administration and achievements of the ECL.

Irrigation upgrades on an almond orchard. Photo courtesy of DEPI.


page 4

Presenter

Presentation Notes

The audit’s objective was to determine the effectiveness of DEPI’s administration of the ECL and its funded initiatives by examining the extent to which: - DEPI’s role in the administration and governance of the levy is effective - initiatives funded by the ECL have achieved their intended outcomes, and - there is sufficient transparency around the administration and achievements of the ECL and the initiatives funded.

Conclusions

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While the administration of individual ECL projects has generally been sound, there are deficiencies in the management of the levy. The audit concluded that there is: • sound project management • weak processes for selecting proposed projects • lack of an evaluation framework • unclear articulation of ECL’s strategic aims and required

revenue • poor public reporting.


page x

Presenter

Presentation Notes

While the audit concluded that DEPI’s administration of individual ECL projects has generally been sound, there are deficiencies in the department’s management of the levy. In particular, we found weaknesses in DEPI’s process for prioritising and selecting proposed projects. And for tranche 3, the strategic aims and required revenue for the ECL were not clearly articulated. The audit also identified an absence of an evaluation framework to assess the effectiveness of the levy, and an insufficient level of public reporting about the levy.

Findings – sound project implementation

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• Departmental project management procedures generally improved over time.

• Appropriate arrangements in place with delivery partners. • Adequate monitoring and implementation.


Data on surface water levels and volumes is collected from gauging stations, such as this one on Yarriambiack Creek, Wimmera Highway. Photograph courtesy of DEPI.

pages 6–14

Presenter

Presentation Notes

The audit found that project management was generally sound and has improved over time. There are reasonable project implementation and governance arrangements in place. These include senior executive oversight, tailored agreements with delivery partners, and monitoring the delivery and implementation of funded projects.

Findings– weaknesses in project selection 9

• Differing views across government about appropriate use funding.

• Unclear whether all tranche 3 projects meet the objectives of the levy.

• No criteria or guidelines for selection and prioritisation of projects.

• Poorly documented decision-making.


pages 6–10

Presenter

Presentation Notes

In the absence of guidelines to inform the selection and prioritisation of projects to be funded by the levy, the broad nature of the ECL’s objectives has enabled a wide range of water-related activities to be proposed for funding. This has led to differing views across government about what constitutes appropriate use of the ECL. Increasingly the alignment with the purposes of the levy is unclear. This is particularly the case for some tranche 3 projects, where funding has been used to supplement core business activities and subsidise other non-ECL related projects. There is also a lack of adequate documentation to support the selection and prioritisation of the projects proposed for ECL funding.

Findings – lack of an evaluation framework for the ECL

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• Two end of tranche reviews but DEPI did not assess the effectiveness of ECL.

• No evaluation framework.

• Project evaluations are patchy and variable in quality, but some good environmental results from the projects.

Irrigation upgrades on an almond orchard in the Mallee. Photo courtesy of DEPI.


pages 19–20

Presenter

Presentation Notes

We also found that although DEPI has undertaken two end of tranche reviews, neither examined the overall effectiveness of the levy. Both reviews instead focused on administrative matters and project management. DEPI has not established an evaluation framework to assess the effectiveness of the levy and its funded initiatives. Consequently, it is not possible to determine the extent to which the levy and funded initiatives have achieved the legislative or project specific objectives. This has resulted in project evaluations that have been inconsistent and of variable quality. However, there have also been more rigorous evaluations conducted that have highlighted the environmental benefits achieved.

Findings – insufficient transparency in public reporting 11

• Strategic priorities of ECL and the associated costs of addressing them are not clearly articulated.

• Very limited public reporting about ECL and funded projects.

• Insufficient transparency.

The Cann River Floodplain looking downstream, showing a linked corridor of native vegetation along the riparian areas. Photo courtesy of DEPI.


pages 20–22

Presenter

Presentation Notes

We found that for tranche 3, the department has not clearly articulated the strategic priorities and the associated amount of funds needed to be recovered by the levy. Public reporting in annual reports has been minimal and does not provide any meaningful information about how the levy has been used, and whether the legislative objectives have been achieved.

Recommendations 12


Accept 1. That as a priority DEPI establishes guidelines to inform

the selection and prioritisation of initiatives funded under the ECL.

2. That DEPI documents the strategic priorities and cost of addressing water policy needs to inform the determination of the total revenue that the levy is being used to recover.

3. That DEPI develops an evaluation framework for the ECL that measures the effectiveness of both the levy and the projects and/or initiatives it has funded.

4. That as a priority DEPI enhances public reporting of the ECL in annual reports and other mechanisms.

Presenter

Presentation Notes

VAGO made four Recommendations towards: 1. establishing guidelines to inform the selection and prioritisation of projects 2. documenting the strategic priorities and cost of the levy 3. developing an evaluation framework for the ECL 4. enhancing public reporting of the levy in annual reports and other mechanisms.

DEPI’s response and proposed actions 13

• DEPI acknowledged the key issues during the course of the audit.

• Four audit Recommendations—all agreed. • DEPI has committed to a series of improvement initiatives. • Actions towards Recommendations 1 and 4 commencing

this year. • Actions towards Recommendations 2 and 3 will be

completed in time for the government to consider continuation of a fourth tranche of the ECL.


pages 29–33

Presenter

Presentation Notes

DEPI acknowledged the key issues during the course of the audit. All four Recommendations have been accepted by the department, who have committed to a series of actions to address the Recommendations.

Final comments 14

• Broader implications for hypothecated funds. • Similar findings to VAGO’s 2009 audit of Management of the

Community Support Fund. • VAGO will consider other similar funds in it’s forward plan.

A grade control structure on the Combienbar river, this structure will reduce deepening and widening of the river channel. DEPI's delivery partner for this projects is the East Gippsland Catchment Management Authority. This was funded under the Tranche 3 -Securing Priority Waterways project. Photo courtesy of DEPI.


Presenter

Presentation Notes

The findings of the ECL audit have implications for other levies, charges and hypothecated funds. Similar issues were identified from VAGO’s 2009 audit, Management of the Community Support Fund, which found a lack of transparency around the fund rising from the broad objectives of the fund and the absence of adequate monitoring, evaluation and public reporting mechanisms. In planning the forward program of performance audits, VAGO will consider other funds in light of these reports.

Contact details 15

For further information on this presentation please contact: Victorian Auditor-General’s Office [p] 8601 7000 [w] www.audit.vic.gov.au/about_us/contact_us.aspx


Presenter

Presentation Notes

All our reports are available on our website. If you have any questions about this or other reports, or if you have anything else you would like to discuss with us including ideas for future audit topics, please call us on 03 8601 7000 or contact us via our website.

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